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[2010] ZAWCHC 206
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Absa Bank v Trustees for the Time Being of the Coe Family Trust and Others (24190/2009) [2010] ZAWCHC 206; 2012 (3) SA 184 (WCC) (1 September 2010)
IN
THE HIGH COURT OF SOUTH AFRICA
WESTERN
CAPE HIGH COURT, CAPE TOWN
Reportable
Case
No.: 24190/2009
In
the matter between:
ABSA
BANK
…...............................................................................
Plaintiff
and
TRUSTEES
FOR THE TIME BEING OF THE COE
FAMILY
TRUST
….......................................................................
First
Defendant
SHAIEK
COE
…......................................................................
Second
Defendant
ZULEIGHA
ABDEROEF
….........................................................
Third
Defendant
CORAM:
D M DAVIS J
JUDGMENT
BY: DAVIS J
FOR
THE PLAINTIFF: ADV J W JONKER
I
NSTRUCTED
BY: HEYNS & PARTNERS INC
FOR THE FIRST,
SECOND &
THIRD
RESPONDENT: ADV M HARRINGTON
INSTRUCTED
BY: GUNTER & ASSOCIATION
DATE
OF HEARINGS
:
1
SEPTEMBER
2010
DATE
OF JUDGMENT
:
01
SEPTEMBER
2010
REPORTABLE
IN
THE
HIGH
COURT
OF
SOUTH
AFRICA
(WESTERN
CAPE
HIGH
COURT,
CAPE
TOWN)
CASE
NUMBER
:
24190/2009
DATE
:
1
SEPTEMBER 2010
In
the matter between:
ABSA
BANK
…...........................................................................................
Plaintiff
and
TRUSTEES
FOR
TIME
THE
BEING
OF
THE
COE
FAMILY
TRUST
….....................................................................................
1
st
Defendant
PLUS
TWO
OTHERS
…...........................................................
2
nd
and
3
rd
Defendants
JUDGMENT
DAVIS,
J
:
This
is an application for summary judgment against the first defendant,
inter
alia,
for
the payment of monies lent in advance, as well as for an order
declaring certain immovable property executable in terms of the
mortgage bond and so far as second and third defendants are
concerned, based on deeds of suretyship in respect of the first
defendant's
obligations.
The
application for summary judgment was opposed, essentially on the
following bases by the defendants:
1.
The extent to which the plaintiff complied with section 92(2) of the
National Credit Act 34 of 2005 ('the Act'), particularly
as regards
the existence of a pre-agreement statement and the quotation in
the
prescribed form.
2.
The extent to which the provision of credit by plaintiff constitutes
so called "reckless credit", especially insofar
as no
assessment, as required by section 81(2) of the Act, was carried out
and insofar as third defendant was a student, earning
no income at
the time that the credit was granted.
Summary
Judgment
The
issue with regard to reckless credit was debated at some considerable
length between the Court, Mr
Jonker
,
who appeared on behalf of the plaintiff and Mr
Harrington
who
appeared on behalf of the defendants. Accordingly, it appears that it
would be best to deal with this question at the outset.
There is,
however, one further preliminary issue which must be dealt with, that
is the question of the nature of the proceedings
as they unfolded
before this Court. There was some debate as to what this Court should
order were it to refuse summary judgment
in that the key issues are
legal questions. To some extent, the implication was, that were
summary judgment to be refused, there
may not be triable issues which
would remain for the purposes of further proceedings.
The
authorities appear to indicate that summary judgment should not be
granted, when any real difficulty as to a matter of law arises.
But
if a court is satisfied that the defence is unarguable, judgment will
be granted. Summary judgment seems also inappropriate
for dealing
with clearly arguable questions of law that should properly be dealt
with on exception. If, however, a case can be
decided on a crisp
point of law, there is no reason at all why the point should not be
determined in an application for summary
judgment. See in particular
Herbstein
& Van Winsen Civil Practice of the High Court of South Africa
(5
th
Edition),
Volume 1 at 540-541.
In
the present dispute, there is a question of law that needs to be
determined. Following the authorities, it appears to me that
this
Court needs, at the very least, to determine the nature of these
legal defences and their justification, in order to further
determine
whether this is a matter which is appropriate for the grant of
summary judgment or for a referral to trial. With these
preliminary
remarks, I turn to deal with the question of reckless credit.
Reckless
Credit
Section
81 is headed "prevention of reckless credit". Subsection
(1) provides:
"When
applying for a credit agreement and while that application is being
considered by the credit provider, the prospective
consumer must
fully and truthfully answer any requests for information made by the
credit provider as part of the assessment
required by this section."
Subsection
(2) indicates what assessment is required:
"A
credit provider must not enter into a credit agreement without first
taking reasonable steps to assess:
(a)
The proposed consumer's -
(i)
general
understanding and appreciation of the risks and costs of the
proposed credit, and of the rights and obligations of a consumer
under a credit agreement;
(ii)
debt
re-payment history as a consumer under credit agreements;
(iii)
existing financial means, prospects and obligations.
(b)
Where there is a reasonable basis to conclude that any commercial
purpose may prove to be successful if the consumer has such
a
purpose for applying for that credit agreement."
Subsection
(4) is also relevant to this dispute. It provides:
"For
the purposes of this Act, it is a complete defence to an allegation
that the credit agreement is reckless if:
(a)
The credit provider establishes that the consumer failed to fully
and truthfully answer any request for information made by
the credit
provider as part of the assessment required by the section.
(b)
a Court or the tribunal determines that the consumer's failure to do
so materially affected the ability of the credit provider
to make a
proper assessment."
Defendant
has averred that no proper assessment was conducted in terms of
section 81(2) and accordingly this failure is a defence
which would
justify the refusal of summary judgment. I should add that there is
nothing on the papers to indicate whether a proper
assessment was
conducted. Mr
Jonker
referred
me to clause 11 of the mortgage loan agreement which forms the basis
of the claim and, in particular, clauses 11.1 to
11.4 which read
thus:
The
borrower states that
he
undertakes his risks and costs, as well as his rights and
obligations under this agreement;
entering
into this agreement will not cause him to become over-indebted as
contemplated in the
National Credit Act;
he
has fully and truthfully answered all and any requests for
information made of him by or on behalf of the bank leading up to
conclusion of
this
agreement.
the
bank has given the borrower a pre-agreement statement and the
Quotation.
In
short, Mr
Jonker
submitted
that these clauses constituted part of an agreement which had been
entered into voluntarily between the parties. Thus,
these provisions
indicated that the defendants understood the risks and costs and the
rights and obligations of the agreement.
Defendants had thereby
confirmed that the agreement would not cause them to become
over-indebted as contemplated in the Act,
confirmed further that
they had fully and truthfully answered all and any requests for
information made of them by or on behalf
of the bank, which led up
to the conclusion of the agreement. Further they accepted that the
bank had provided them with a pre-agreement
statement and the
Quotation as was indicated.
In
short, Mr
Jonker
's
submission was that this agreement, entered into voluntarily between
the parties, covered all the requirements for a prescribed
assessment. He went further and submitted that it was not open to
the defendants to raise a defence of reckless credit, because,
in
terms of section 81(4), if it is established that the consumer
failed to fully and truthfully answer requests for information
made
by the credit provider, this was a complete response to the
averments of defendants. In short, having entered into the
agreement, possessed of all of the details, to which I have made
reference, the defendants cannot now raise questions relating
to
over-indebtedness nor that they did not understand the inherent
risks, because they had entered into a contract which had
specifically made provision for these issues. In short, section
81(2) of the Act was not of application when clauses 11.1 - 11.4
of
the agreement so concluded, confirmed the veracity of the answers
given by defendants. There could be no justifiable defence
raised
because the provisions of section
81(4)
now came to the assistance of plaintiff as credit provider.
Summarised,
plaintiff's case is that defendants are not able now to put up the
defence it has set out when their financial position
was confirmed
in terms of the agreement. In particular, clauses 11.2 and 11.3 were
not fully and truthfully answered and hence
section 81(4) provides a
full defence to plaintiff. Accordingly, in Mr Jonker's view, the
plaintiff had complied with its obligations
in assessing the
financial position of first defendant. This was further confirmed in
the conveyancer's certificate of compliance
which was attached to
the papers.
By
contrast, Mr
Harrington
,
submitted that section 81(2) governed this dispute, notwithstanding
the terms of the contract. If section 81(2) of the Act could
be so
circumvented by the provisions of a standard form contract, this
would ultimately subvert the key purposes of the Act.
In this
connection, he referred to section 90 of the Act, entitled "unlawful
provisions of a credit agreement", subsection
(2) of which
provides that:
"A
provision of a credit agreement is unlawful if:
(a)
Its general purpose or effect is to;
(i)
defeat
the purposes or policies of this Act;
(ii)
deceive
the consumer;
(iii)
subject
the consumer to fraudulent contact.
(b)
it directly or indirectly purports to:
(i)
waive
or deprive the consumer of a right set out in this Act;
(ii)
avoid
a credit provider's obligations or duty in terms of this Act;
(iii)
set
aside or override the effect of any provisions of this Act;
(iv)
authorise
the credit provider to;
(aa)
do anything that is unlawful in terms of this Act; or
(bb)
fail to do anything that is required in terms of this Act."
In
this context, a considerable debate took place between counsel about
the purposes of the Act. Section 3, as is now the case
with modern
forms of legislation, sets out the purpose and application of the
Act. To the extent that it is relevant, section
3 provides:
"The
purposes of this Act are to promote and advance the social and
economic welfare of South Africans, promote a fair, transparent,
competitive, sustainable, responsible, efficient, effective and
accessible credit market and industry and to protect consumers
by:
(b)
ensuring
consistent treatment of different credit producers and different
credit providers.
(c)
promoting
responsibility in the credit market
by;
(i)
encouraging
responsible borrowing, avoidance of over-indebtedness and fulfilment
of financial obligations by consumers;
(ii)
discouraging
reckless credit granting by
credit providers and contractual
default by consumers.
(d)
promoting
equity in the credit market by
balancing the respective rights
and responsibilities
of credit providers and consumers."
While
the Act may not be classified purely as a piece of consumer
protection, it seeks to strike a balance between the interests
of a
credit provider and the borrower, to ensure a measure of fairness
and equity within the credit market, and, further, to
prevent
reckless credit agreements from being concluded, which, in turn,
place the credit market in considerable jeopardy, of
which a court
can now take judicial cognisance, given the financial and banking
crisis that has engulfed the world economy since
2008.
In
my view, section 81(2) was designed to bring about some balance
between the credit provider and borrower and to give teeth
to the
Act's purpose of ensuring that reckless credit does not take place.
Section
81(2) informs the credit provider of its duties. In this connection
it needs to assess the proposed consumer's general
understanding and
appreciation of the risks and costs of the proposed credit, of their
rights and obligations. It thus needs
to assess the debt repayment
history, the borrowers' existing financial means, prospects and
obligations. Compare this purpose
to clause 11. Clause 11 refers to
over-indebtedness, but that is where the clause begins and ends.
There is no indication as
to whether, in terms of clause 11.3, a
request for information was made of any of the defendants by and on
behalf of the plaintiff,
leading up to the conclusion of this
agreement; that is a request for information which would have
ensured that the credit process
was undertaken in terms of the three
pronged set of inquiries contained in section
81(2)
Section
81(4) needs to be read together with section 81(2). It clearly gives
the credit provider a defence in terms of the overall
purpose of the
Act, to ensure fairness to both parties in circumstances where the
consumers fail to fully and truthfully answer
any request for
information made by the credit provider as part of its assessment.
But, if an assessment was not undertaken in
the first place, then
section 81(4) is of no relevance.
It
was argued by Mr Jonker that the parties entered into an agreement
and accordingly the notion of
pacta
sunt servanda
must
now have application. In this connection, Mr
Jonker
referred
the Court to the decision of the Supreme Court of Appeal in
Brislev
v Drotskv
2002(4)
SA 1 (SCA). This has proved to be a controversial judgment in that
it has been interpreted as a representation of an unbending
application of the doctrine of
pacta
sunt servanda,
which,
in turn, is incompatible with the Constitution and the
constitutional commitment to a form of engagement with power
imbalances
which have dominated South African society for over 300
years. See, for example,
L
Hawthorne
2003
SA
Mercantile Law Journal
271,
AJ Barnard 2006(17)
Stellenbosch
Law Review
386;
D Bhana 2007(124)
SALJ
269.
The
fact, however, is that the Supreme Court of Appeal has asserted this
particular doctrine to be central to our law of contract
Mr
Jonker
was
thus correct to remind me that I am bound by this decision,
notwithstanding any reference to the powerful criticisms of the
judgment with which I fully associate myself.
However,
there is a further issue which is of some significance in these
proceedings. In
Barkhuizen
v Napier
2007(7)
BCLR 691 (CC),
Nqcobo
,
J (as he then was) confirmed the normative framework of contract law
and the doctrine of
pacta
sunt servanda,
as
it has been set out in
Brisley
supra.
The learned judge of the Constitutional Court went on to say:
"[Many
people in this country conclude contracts without any bargaining
power and without understanding what they are agreeing
to. That will
often be a relevant consideration in determining fairness. This
Court must, however, operate on the basis of the
evidence that was
presented to the High Court and that is now before us. There is no
admissible evidence that the contract was
not freely concluded, that
there was unequal bargaining power between the parties or that the
clause was not drawn to the applicant's
attention. There is nothing
to suggest that the contract was not freely concluded between the
parties with equal bargaining power,
or that the applicant was not
aware of the clause. On the contrary, the indications are that he
was aware of the time limits...
[This was a case dealing with a time
limitation clause in an insurance contract.] The contract required
him to submit a written
claim with the respondent within 30 days of
the accident, but he submitted his written claim within at least
eight days of the
accident through his insurance broker. I am unable
to conclude that the 90 day period allowed to the applicant to sue
is so unreasonable
that its unfairness is manifest and that,
therefore, its enforcement would be contrary to public policy."
(para 65-67).
In
Bredenkamp
V Standard Bank Ltd
2010(4)
468 (SCA) Harms DP interpreted this judgment as follows:
"I
do not believe that the judgment held or purported to hold that the
enforcement of a valid contractual term must be fair
and reasonable,
even if no public policy consideration found in the
Constitution
or elsewhere is implicated." (para 50)
I
was thus compelled to re-examine my reading of
Barkhuizen
to
see whether the approach adopted by Harms DP presents the approach
that I proposed to adopt. To the extent that the
dictum
of
Harms DP suggests that fairness is not to be considered in an
enquiry into the enforceability of a contract, that reading would
be
in direct conflict with
Barkhuizen
supra,
and particularly paras 65-66 which are not considered by Harms, DP
in his judgment. By contrast, if the learned Deputy
President is
suggesting that any enquiry into fairness can only take place
through the prisma of public policy as mediated by
the values of the
Constitution, then nothing is added to the existing state of law as
I sought to so apply it. Fairness and reasonableness
in contract
from part of the determination into the exercise of a party's
freedom. See
Barkhuizen
at
para 57. In so determining this question, evidence from the party
seeking to assail the contract is then required.
In
this case, sitting as a judge dealing with an application for
summary judgment, it may well be that the defendants can produce
evidence before a trial court to suggest that these clauses were not
properly drawn to their attention and that the factors as
set out by
Ngcobo, J in para 65-66 were applicable to the present dispute.
Harms,
DP, in
Bredenkamp
,
supra, at para 38 observes that:
"Determining
whether or not an agreement was contrary to public policy requires a
balancing of competing values...Reasonable
people, irrespective of
any philosophical or political bent, might disagree whether any
particular value judgment was 'correct',
i.e. more acceptable."
The
learned Deputy President also notes that:
"Public
policy and the
boni
mores
are
now deeply rooted in the Constitution and its underlying values."
(Para 39)
These
are important affirmations of the inherent contested nature of
adjudication, particularly with a legally all embracing Constitution
in which an inquiry into values is deeply imbricated in the judicial
process. But invoking the Constitution should not be seen
or
employed as a bland jurisprudential war cry. Rather it behoves a
court to engage with public policy in express terms, guided
by the
objective normative value constitutional system referred to in
Carmichele
v Minister of Safety & Security & Another
2001(10)
BCLR 995 (CC) at para 54. By engaging expressly with how it seeks to
develop or articulate public policy, a court should
explain its
application of the normative framework to its chosen outcome.
Given,
the nature of the three dominant values, freedom, , equality and
dignity read together with the history from which the
Constitution
has asked the country to journey, South African law needs to come to
terms with the economic and social reality
that prevails in our
country. (Barkhuizen at para 64). That includes an understanding
that all too many people are completely
or partially illiterate,
possessed of poor education, have no access to legal advice or
social power. In so many ways therefore
legal relationships are
imposed upon them, so that freedom to act cannot simply be assumed.
I
cannot apply these considerations to this dispute because this Court
is dealing with a summary judgment application. Therefore,
to the
extent that
Barkhuizen
and
Brisley
are
relevant, evidence as indicated, may be relevant to the
determination of the issues at trial; that is the circumstances in
which the agreement was entered into and the kind, if any, of
assessment that was entered into by the plaintiff in terms of
section 81(2) and whether this was insufficient for the purposes of
the Act as I have outlined it. In this way, the kind of balance
of
interests foreshadowed in
Barkhuizen
,
supra, ca be properly assessed.
For
all of these circumstances, it appears to me that the defendant has
placed before this Court a defence sufficient to raise
issues which
could only be determined by a trial court. Therefore, summary
judgment is dismissed with costs, the plaintiff, of
course, is
granted leave to proceed by way of trial, but given its approach to
date, a costs order is appropriate.
DAVIS, J